It’s everyone’s favorite time of year: tax season! And while we aren’t exactly jumping for joy that it’s time to buckle down and go through our finances for the past year, we do recognize how important it is. So let’s chat about the 2023 tax season, from dates and deadlines to changes in side hustle payments.
Here’s everything you need to know about filing your 2022 taxes in tax season 2023.
What are some changes in this 2023 tax season?
2023 Tax Season Dates
The IRS started accepting returns for the 2023 tax season on January 23, 2023. Nearly 170 million returns are expected to be filed this year. The tax filing deadline is April 18, 2023. It is not on April 15, as it usually is, because April 15 is a Saturday. Instead they have extended it to the following Tuesday.
1099-K Reporting
There has been a lot of confusion surrounding the new requirement for third party payment platforms (such as Venmo and Paypal) to provide 1099-Ks for all people earning over $600 in payments for side hustles and gigs. Due to the confusing and controversial nature of this new law, this rule has been delayed. As a result you may not receive a 1099-K from these companies.
The IRS still emphasizes that you need to report all taxable income on your federal tax return whether you receive a 1099 or not.
EV Tax Credit
If you bought an electric vehicle in 2022, there are some changes to the EV tax credit. The Inflation Reduction Act allows for a tax credit up to $7500 on qualifying new electric vehicles and a lower credit on qualifying used electric vehicles. These new vehicles have a higher standard of “clean”.
If you purchased your vehicle before the Act was signed into law on August 16, 2022 you can take advantage of the previous EV tax credit. You must provide a signed sales contract.
If you purchased your vehicle after August 16, 2022, the old rules apply but your vehicle must have its final assembly in the United States.
Itemized Charitable Deductions
For the past few years taxpayers have been allowed to claim an “above the line” deduction of up to $600 for their charitable deductions. This is now reverting and you must itemize deductions once again. The adjusted gross income ceiling on cash contributions is also returning to 60%.
Special Payments
If you received a type of special payment from the government, such as an inflation relief check or 2022 special rebate, the IRS has announced that it will not be treated as taxable income. There was confusion about this early on and the IRS originally told taxpayers in 21 states to hold off on filing until they reached their decision. But on February 10th they released this statement:
“During a review, the IRS determined it will not challenge the taxability of payments related to general welfare and disaster relief. This means that people in the following states do not need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.”
If you are wondering about a specific rebate you received, it’s best to consult a tax professional.
What can you expect from your 2022 tax return?
The IRS is warning people that their refund may be less than it was in previous years. This is due to a number of changes between last year and this year.
- The standard deduction is higher. In 2022 the standard deduction for a single filer was $12,950 and $25,900 for a married couple filing jointly. In 2023 this has increased to $13,850 for a single filer and $27,700 for a married couple filing jointly. This means that it will be harder for people to claim charitable contributions.
- The Child Tax Credit is returning to $2,000 from $3,600 per child. This increase was intended as a relief during the pandemic and has now reverted to its normal amount.
- The Earned Income Tax Credit has lapsed. Last year taxpayers claiming the EITC who had no children received $1,500. This will reduce in 2022 to $500.
How to File your 2023 Taxes
Step 1. Determine if you need to file.
If you had income tax withheld from your paychecks, made estimated tax payments, or qualify for certain tax credits, you most likely should file taxes. Ultimately your filing status will depend on your age, income, and whether or not someone else can claim you as a dependent.
Step 2. Choose how you will file your taxes.
You have three options when it comes to how to file your taxes.
- You can use IRS Form 1040 or Form 1040-SR to fill out your taxes manually and mail them in. This is not a recommended method.
- You can use tax software such as H&R Block or TurboTax to electronically fill out your taxes and submit them. This is a great option for most people who do not have a complicated financial situation.
- You can hire a tax professional to file your taxes on your behalf. This is a great option if you have your own side business or operate a lot of accounts.
Step 3. Gather your documents.
Perhaps the most time consuming part of filing your taxes is gathering all of the necessary documents. Here are some of the most common documentation you will need:
- Social Security Numbers. You will need the Social Security numbers for yourself, your spouse, and any dependents (if applicable).
- W-2 form. This form will come from your employer and tells how much you earned in the past year as well as how much you already paid in taxes.
- 1099 forms. These forms show that some entity or person who is not your employer paid you money. These may include returns on interest (Form 1099-INT) and returns on dividends (Form 1099-DIV).
- Retirement account contributions. Retirement contributions are typically recorded on Form 5498.
- Property taxes and mortgage interest. Your mortgage company should provide you with Form 1098 (if you paid over $600 in interest throughout the year).
- State and local taxes. Keep track of any taxes you have paid throughout the year.
- Charitable donations. Any money or goods that you donated to a tax-exempt organization, such as a charity, can be deducted from your adjusted gross income.
- Educational expenses. Tuition, fees, books, room and board, and other necessary expenses such as transportation may be deducted.
- Unreimbursed medical bills. The IRS will allow you to deduct preventative care, treatment, surgeries, dental care, vision care, visits to psychologists and psychiatrists, and prescription medications. You may also deduct appliances such as glasses, contacts, false teeth and hearing aids, and travel for medical care.
- Freelance expenses. If you are self employed you may deduct work related expenses.
- Last year’s federal and state tax returns.
Step 4. File on Time
The deadline for filing in 2023 is Tuesday, April 18. If you are unable to file on time for some reason, be sure to request an extension. You can usually get a six month extension which allows you to file until October. But keep in mind that if you owe money you will be responsible for additional interest and fees.
Step 5. Settle Up
Most of the time you will either owe money to the IRS or the IRS will owe you money. If you owe money to the IRS there are a number of ways you can make your payment.
- Electronic Funds Withdrawal (EFW)
- IRS Direct Pay
- Debit Card
- Credit Card
- The Electronic Federal Tax Payment System (EFTPS)
- Wire Transfer
- Check or Money Order
- Cash
- Mobile (IRSToGo)
If you are having trouble paying the total amount you owe, you may also set up an installment plan. You will have to pay interest and fees until the full amount is paid. There is a short term payment plan and a long term payment plan.
If the IRS owes you money, you can collect your refund via direct deposit (which is the fastest way). You can also request a paper check be sent to you. Refunds are typically sent out within 21 days of filing, but additional review may be required. Filing electronically and having the refund sent to your direct deposit is the fastest way to get your 2022 tax refund. You can track your refund status online.
That’s everything you need to know about filing your 2022 taxes during the 2023 tax season.
Tax time can be confusing, but staying organized and prepared can help you file your taxes with ease. It’s also a great time to sit down and thoroughly review your budget to see how your income and expenses are lining up.
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